U.S. GDP Growth Picks Up as Inventories Firmby Tom Moeller July 28, 2017

Economic growth accelerated during Q2'17 to 2.6% (2.1% y/y),
the quickest advance in three quarters. Real GDP growth during Q1 was revised to
1.2% from 1.4%. Earlier estimates for 2015 and 2014 were revised slightly
higher. Growth of 2.5% had been expected in the Action Economics Forecast Survey.

An absence of inventory decumulation accounted for the
acceleration in growth. Inventory change had no effect on growth after
decumulation subtracted 1.5 percentage points in Q1'17 and subtracted 0.4
percentage points during all of last year. Improvement in the foreign trade
deficit added 0.2 percentage points to growth, as it did during Q1. Exports grew
4.1% (3.4% y/y) and imports rose 2.1% (4.2% y/y).

The GDP price index grew 1.0% (1.6% y/y) following two
quarters of 2.0% gain. A 1.4% rise had been expected. The PCE price index
improved just 0.3% (1.6% y/y) after a 2.2% rise. The gain was held back by a
3.4% decline in durable goods prices, down 2.3% y/y. Nondurable goods
prices also weakened 3.6% (+1.1% y/y) as prices for gasoline and other energy
products fell. Services prices improved 2.1% (2.3% y/y). The business fixed
investment price index rose 2.4% (1.7% y/y), but growth in the residential
investment price index accelerated to 4.1% (4.2% y/y).

The GDP figures can be found in Haver's USECON and USNA
database. USNA contains virtually all of the Bureau of Economic Analysis' detail
in the national accounts, including the integrated economic accounts and the
recently added GDP data for U.S. Territories. The Action Economics consensus
estimates can be found in AS1REPNA.